(o complete) TUBIEM 5-1 (similar to) (Compound interest) To what amount will the
ID: 2812094 • Letter: #
Question
(o complete) TUBIEM 5-1 (similar to) (Compound interest) To what amount will the following investments accumulate? a. $5,000 invested for 9 years at 10 percent compounded annually. b. $7,800 invested for 6 years at 8 percent compounded annually. c. $775 invested for 13 years at 13 percent compounded annually d. $23,000 invested for 6 years at 5 percent compounded annually a. To what amount will $5,000 invested for 9 years at 10 percent compounded annually accumulate? S(Round to the nearest cent.)Explanation / Answer
Solution :
The formula to calculate the accumulated amount for a given principal amount, after interest is compounded annually is
= P(1 + r/ 100)
Where P = Principal amount ; r = rate of interest ; n = No. of periods or years ;
As per the information given in the question we have,
P = $ 5000, r = 10 % per annum and n = 9 years.
Using the formula A = $ P(1 + r/ 100) we have
Accumulated amount after 3 years = $ (5000 * (1 + 10/100)9 )
= $ (5000 * (1 + 0.10)9 )
= $ 5000 * (1.10)9 = $ 5000 * 2.3579 = $ 11,789.7385
Thus, $ 5000 will lead to an accumulated amount = $ 11,789.7385
= $ 11,789.74 (when rounded off to two decimals) and
= $ 11,789.7 (when rounded off to the nearest cent)
Compound interest = ( Accumulated amount after compounding – Principal amount )
= $ (11,789.7 - 5000)
Therefore, compound interest = $ 6789.7
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